Activity-Based Management
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Questions and Answers

What is the primary goal of Activity-Based Management?

  • To analyze the cost of an activity in relation to the value added by the activity (correct)
  • To forecast and determine crucial financial information for future
  • To reduce costs without compromising the quality of the product or service
  • To identify opportunities to improve operational efficiency
  • What is the purpose of identifying and listing a company's significant business activities and their cost drivers?

  • To evaluate the profitability of an activity
  • To determine the value generated by each activity
  • To identify opportunities to improve operational efficiency
  • To find and quantify the cost drivers of the activities (correct)
  • What is the result of using Activity-Based Costing and value-chain analysis?

  • Reducing costs without compromising the quality of the product or service
  • Identifying opportunities to improve operational efficiency (correct)
  • Determining the profitability of an activity
  • Forecasting and determining crucial financial information for future
  • What is the main difference between Operational ABM and Strategic ABM?

    <p>One focuses on operational efficiency, while the other focuses on analyzing the profitability of an activity</p> Signup and view all the answers

    What is the primary goal of Cost-Driven ABM?

    <p>To reduce costs without compromising the quality of the product or service</p> Signup and view all the answers

    What is the primary goal of Value-Driven ABM?

    <p>To increase customer satisfaction and loyalty</p> Signup and view all the answers

    What is one of the advantages of Activity-Based Management?

    <p>It can improve the experience of a customer</p> Signup and view all the answers

    What is a disadvantage of Activity-Based Management?

    <p>It is a time-consuming process</p> Signup and view all the answers

    What is the relationship between Activity-Based Costing and Value-Chain Analysis?

    <p>They are used together to identify opportunities to improve operational efficiency</p> Signup and view all the answers

    What is the ultimate goal of using Activity-Based Management in an organization?

    <p>To achieve operational and/or strategic improvement</p> Signup and view all the answers

    Study Notes

    What is Activity-Based Management?

    • Activity-Based Management (ABM) analyzes the cost of an activity in relation to the value added by the activity to achieve operational and/or strategic improvement.

    How it Works?

    • Identification involves finding and listing a company's significant business activities and their cost drivers.
    • Evaluation and Value-Chain Analysis quantify the value generated by each activity to compare it to the cost and evaluate the activity.

    Steps in ABM

    • Identification and Analysis: find and list significant business activities and their cost drivers.
    • Evaluation and Value-Chain Analysis: quantify the value generated by each activity to compare it to the cost.
    • Identifying Opportunities to Improve: use analyzed information to identify and implement process improvements.

    Types of ABM

    Operational ABM

    • Studies the cost of each activity to increase operational efficiency by enhancing value-generating activities and eliminating unnecessary costs and non-value-generating activities.

    Strategic ABM

    • Analyzes the profitability of an activity, such as launching a new product or acquiring a new customer.

    Types of ABM (continued)

    • Cost-Driven ABM: aims to reduce costs without compromising product or service quality.
    • Value-Driven ABM: aims to increase customer satisfaction and loyalty, leading to increased sales and profits.

    Advantages of ABM

    • Improves customer experience.
    • Increases profitability.
    • Provides crucial financial information for future forecasting.

    Disadvantages of ABM

    • Time-Consuming.
    • Costly.
    • Complex.

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    Description

    Learn about Activity-Based Management, a method that analyzes the cost of an activity in relation to its value added, aiming for operational and strategic improvement.

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